In late 2010, former trade minister Peter Van Loan announced that
Canada and Israel would start exploratory talks to upgrade the Canada-
Israel Free Trade Agreement (CIFTA). Earlier this year, the Ministry
of International Trade finished public consultations and is now in
internal discussions to implement the upgrades. This creates an
opportune time to fix a loophole in the existing free trade agreement
to ensure Canada’s compliance with its own foreign policy as well as
its international obligations.

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As with any free trade agreement, CIFTA is intended to promote trade
between the countries that are party to the agreement, in this case,
Canada and Israel. The trouble with CIFTA is that it extends
preferential trade treatment, including lower tariffs, to goods
produced in Israeli settlements located within occupied Palestinian
territory as if they were made in Israel. In other words, a loophole
in CIFTA treats Israeli-occupied territory as if it is Israeli
sovereign territory.

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So what’s the big deal?

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Canada’s official policy, as stated on the Ministry of Foreign
Affairs website, provides: “Israeli settlements in the occupied
territories are a violation of the Fourth Geneva Convention. The
settlements also constitute a serious obstacle to achieving a
comprehensive, just and lasting peace.” If, as a matter of Canadian
policy, settlements are unlawful, there should be no objection to
excluding the forbidden fruits of the settlement enterprise.

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Yet Canada not only grants these illegal goods access to its markets,
but it also extends them the full benefits of free trade underwritten
by Canadian tax dollars. Where do these rewards and profits go? Right
back into the settlements that ostensibly offend Canadian foreign
policy. In essence, Canadian tax dollars are unwittingly used to
subsidize unlawful settlements.

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Settlement goods range from cosmetic products and chemicals to
industrial and agricultural goods. Many of the offending products
have been identified by third parties such as WhoProfits.org. What
these products have in common is that they are all derived from
factories or farms illegally built on confiscated Palestinian land,
exploit scarce Palestinian water resources, and are not even held to
the same environmental standards as businesses inside Israel.

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The full extent of the settler economy is not known because the
Israeli government only publishes aggregate GDP data for Israel and
the settlements. However, estimates put the annual value of
settlement exports at hundreds of millions of dollars.

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Since CIFTA came into force in 1997, trade between Canada and Israel
and the settlements jumped from $507 million to $1.4 billion in 2010.
Meanwhile, the Palestinian economy has suffocated under the burden of
the occupation and the settlements. Due to closures and movement
restrictions imposed by a military occupation and artificially
created scarcity of land and water, the result is that rent and land
prices, as well as energy, transportation and labour costs are more
expensive for Palestinian businesses — sometimes prohibitively so.

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If I were a Canadian producer or consumer, I would find the loophole
for settlement goods to be morally if not legally objectionable. The
loophole creates unfair competition for law-abiding Canadian
producers who shouldn’t have to compete with illegal settlement goods
at all. And Canadian consumers deserve better choices. Mislabelling
products as “Made in Israel” prevents consumers from making informed
and ethical choices.

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The right thing to do — the Canadian thing to do — is to ensure that
the Ministry of International Trade closes the loophole in the
upcoming upgrade. Any free trade benefits should be limited to the
intended goods made in Tel Aviv, Nazareth and other places inside
Israel. Countries in Europe and South America have taken steps to do
so in their respective free trade agreements with Israel and serve as
useful precedents for the Canadian ministry to consider.

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The stagnating peace process is on the verge of imploding primarily
because of the ever-expanding settlement enterprise. With the
international community hard-pressed to persuade Israel to end its
unhealthy addiction to settlement growth, Canada’s decision to
continue rewarding illegal settlement products creates an unfortunate
perception that Canada is playing the role of enabler for Israel’s
addiction.